The P&G-Godrej Alliance

Presentation by Team 11

Summary of the case

• Procter&Gamble, the $34 billion

multinational entered into the Indian

market with Ariel Brand through the

alliance with Godrej.

• Some of the products of P&G are Clearsil,

Pantene, Comfort, Surf excel, Rin and

Fair&Lovely.

Contd..

• In the year 1995, Godrej was in a position of

dumped with high class competitors.

• Problems faced by Godrej was enormous:

a. Excess manufacturing capacity due to

manufacturing contracting.

b.Lack in the penetration of growing rural

market.

Contd..

• P&G lacked in adequate production and

distribution facilities for soaps.

• In 1992 December , P&GG signed an

agreement to establish a Joint Venture.

• As per the agreement, the soaps should

be manufactured under the Godrej plant

only.

Contd..

• In Dec 1994, a general talk came that the

Godrej Products are not promoted properly.

• Marketing consultant says that, P&G is

capturing reverse aspirations for its brands.

• Concept of P&G marketing is “other

companies may actively discriminate

consumers but Godrej see it as one”

Contd..

• The sales tonnage created a serious

problem to Godrej.

• The production cost of Godrej

increased this is one of the reason

that tend the companies to end up

the venture.

Related TheoryEntry Modes• Exporting

• Joint Venturing

• Licensing

• Contract manufacturing

• Management Contracting

• Direct investment

Contd..

• Exporting

Entering a foreign market by selling

goods produced in the home country.

• Joint venturing

Joining with foreign companies to

produce or market products or services.

Contd..

• Licensing

Company enters into an agreement with a

licensee in the foreign market.

• Contract Manufacturing

A company contracts with manufacturers in

a foreign market to produce the product or

provide its service.

Questions for discussionQuestion 1

Evaluate the gains of P&G and Godrej soaps

from the alliance.

Gains of Godrej

Freedom to focus on core competence

Ability to keep financial commitments low

Allocation of resources to value added

activities.

Contd..

Gains of Godrej

Access to managerial competence

Advanced manufacturing technology

Exposure to competitive practices

Question 2

Analyze the reasons for the break down of

the Alliance.

The sales volume of Godrej got reduced

Less promotion of Godrej products by

P&G

Lack of coordination between Godrej and

P&G in brand building Exercise.

Question 3

Why did P&G neglect Godrej Brands?

Discuss its implications.

P&G felt uncomfortable with Godrej’s

methodical and analytical approach as

opposed to its own instinctive method of

launching brands at breakneck speed.

Question 4

Why was Godrej soaps not able to ensure proper

promotion of its brands by P&G?

The reason behind is, P&G adopted a marketing

strategy that focus marketing globally.

P&G focus the market evenly. The soaps like

Trilo and Key is not up to the standards of

international market.

Question 5

Evaluate the strategy pursued by P&G through

P&GG

Most companies might actively discriminate

consumers in one country versus another, but

P&G looked for similarities and evenness.

This concept gave a tough situation to Godrej

because P&G never looked for the recovery of

Godrej Brand.

Question 6

What are the lessons provided by the P&GG

alliance?

Resolve all the differences right at the

start.

The inability of the partners in bridging the

gap should be taken into consideration

Conclusion

Strategic alliances have the potential

to yield tremendous benefits for the

partners involved. however, they

have to be managed carefully, as

various difficulties may arise.